Taking it a notch higher with a twist

But while most of the attention at the time–it was August, after all–centered on the company’s hands-off approach to vacation (no vacation policy, employees take whatever they deem necessary), Netflix’s way of compensating its employees is just as radical, if not more so.

The Los Gatos, Calif.-based company takes a market-based approach to pay, believing that to get the best employees, it must pay above-market rates. Rather than setting a new staffer’s salary against what his internal peers make–an approach many companies take–Netflix carefully studies what that person could earn at other companies in combined salary and bonus, and then sets their pay a notch higher. Then, end of the year cash and stock incentives are not paid.

While that’s a highly unusual approach, what’s really radical is what comes next. Employees get to choose how much of their total pay comes in cash versus equity. Risk-averse employees can take the safe route, requesting the entire sum in cash. Those who want to tie their fortunes to Netflix’s can take half of it in equity, or other combinations of cash and stock. “If you have a high performance team, with fully formed adults,” asked Netflix’s Chief Talent Officer Patty McCord when I interviewed her recently, “why are we being paternalistic about compensation?”

What Netflix is doing with both its vacation and pay policies is to make its in-demand engineers feel like rational, thinking adults. The company trusts them to make decisions, and to act in the best interests of both their company and themselves.

But by not paying an annual bonus, it’s also fostering the sort of environment that doesn’t encourage outsized risk-taking by employees doing whatever they can to meet their annual goals. That hardly means the company doesn’t wave any sticks: Netflix’s zero tolerance for mediocrity means employees are incentivized to keep their jobs at a company that pays them above-market salaries and treats them like the professionals they are.

The Green Goldfish Project is a quest to find 1,001 examples of marketing lagniappe for employees. Green goldfish are the little signature extras given to employees. They help differentiate a company, increase employee retention and drive positive WoM.